Pulse 19

Strategies for supporting sustainable and climate-smart advisory services

Published on

June 11, 2020

Smallholder farmers are uniquely vulnerable to a wide range of disruptive shocks, from volatile markets to climate change. In the face of healthcare and supply chain disruptions caused by COVID-19, building farmers' resilience to such volatility is more important than ever. Advisory services—which provide farmers with knowledge, tools, and market linkages—help farmers adopt optimal practices that build their resilience to these kinds of shocks. Yet there’s a gap in understanding the different models of advisory services and the ways that donors and other stakeholders can enable them.

While most advisory services are provided through government-, donor-, or corporate-subsidized models, a growing number of commercially sustainable service providers are emerging—often with the help of digital technology. Alongside the broader trend toward sustainable and market-driven development interventions, these models have the potential to deliver advisory services sustainably, effectively, and at scale. This potential is particularly salient when it comes to advisory services focused on climate-smart agriculture.

To map out this opportunity, the Swiss Re Foundation and ISF Advisors have published an initial landscape analysis titled “Strategies for Supporting Sustainable and Climate-Smart Advisory Services.”

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Overview of the market

Overview of the market

In our landscape analysis, we catalogued and analyzed more than 70 advisory service providers to reveal seven distinct model types. Public extension (model 1) and donor-subsidized advisory services (model 2) are driven primarily by the desire to achieve improved farmer livelihoods and broader economic development objectives. These mission-driven models make up the majority of the market in terms of both farmers reached and funding allocation.

Corporate-led models—either by agricultural (model 3) or non-agricultural businesses (model 4)—deliver advisory services as a complement to their core business activities. While they may include a livelihoods-driven component, the main objective of these models is to indirectly generate revenue for a business’ bottom line. For instance, by providing or subsidizing advisory services, offtakers can increase farmer loyalty and improve the volume, security, and/or quality of their sourcing. Although less widespread than public and NGO-driven models, models 3 and 4 have provided advisory services to a substantial portion of the market. These models are mainly in cash crop and/or tight value chains, and are typically focused on a single crop.

However, there is an emerging segment of providers that seek to generate revenues directly from advisory services provision. These models (5-7) may generate their revenue from their farmer-customers (B2C models) or from business, development, or government partners (in B2B, B2D, or B2G models, respectively) that pay for service delivery or for information gathered through service delivery. In our analysis, we focused on models 5 through 7. These models have the potential to provide more durable, scalable, and sustainable support to farmers, without reliance on public/donor funding or internal cross-subsidization.

While we recognize that commercially-sustainable models may not be feasible for the entire market—for instance, a number of experts we spoke to believe that it may not be feasible to profitably serve subsistence farmers—we believe there is tremendous potential for innovation and scaling. The emergence of digital technologies can greatly reduce operating costs of such models, and can enable more efficiency, impact, reach, sophistication, and customization that will enhance the sustainability of these models. Digital advisory services can also offer a crucial information source for farmers during crises, such as the COVID-19 crisis, during which many governments have utilized digital technologies to distribute important agricultural as well as health and safety information.

We also believe that commercial advisory service models add value which is often not yet fully quantified or translated into revenues, and in particular see B2B revenues as representing significant untapped potential. For donors, such models represent an attractive opportunity to fund innovation, development, and growth of promising organizations, with an explicit aim of achieving sustainability following a finite period of support. This seed funding is critical—a recent report by CTA found that commercial service providers focused on digital advisory collectively generated $103M in revenues in sub-Saharan Africa during 2018, a small fraction of the estimated $1.7B spent on publicly funded extension services in the region in 2018.

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Challenges for commercially sustainable advisory services

At the same time, our landscape analysis has revealed numerous challenges for the creation, growth, and scaling of commercially sustainable, climate-smart advisory service models.

  1. B2C revenues are hard to generate because many farmers often lack discretionary income and already have access to alternatives subsidized by governments, development organizations, or corporate actors. Additionally, the impact and value created by advisory services is inherently difficult to quantify, and service providers often have trouble translating their value proposition to potential customers. Positive farm outcomes depend on a variety of factors—such as weather, prices, and inputs—and the contribution of advisory services may be unclear. 
  2. Generating sustainable B2B revenues is also challenging. Though many businesses understand the benefits of providing advisory services themselves (as we see in models 3 and 4), actual or perceived high levels of cost and complexity may prevent them from partnering with commercially driven service providers. As with farmers, there is limited publicly available evidence on the value proposition of commercial advisory services for businesses.
  3. Setting up digital advisory service models can be expensive. While technology can enhance advisory service provision, the set-up can be costly and time-consuming (though these models tend to be highly scalable, with per customer operating costs decreasing with scale and time). In order to scale, these models will also need to acquire or develop content, establish relationships with farmers, create delivery channels, and in some cases have physical infrastructure or human presence in the field. 
  4. Complementary services are not always available. Advisory services are most valuable when provided alongside other complementary services—such as input provision and financing. In many contexts, these complementary services are not available or accessible; meaning advisory service providers must either build a sustainable business with a less than optimal value proposition or expand their service offering, making their model less specialized and more complex and costly.

When it comes to climate-smart advisory services, there are additional challenges. Climate-smart agriculture is increasingly important, as farmers are directly threatened by the impacts of climate change and require knowledge, tools, and capital to build their resilience in the face of this threat. Advisory services can help farmers reduce their greenhouse gas emissions—for example, through changes in input usage, reduced tillage, or planting of cover crops. They can also position farmers to increase productivity and incomes while adapting to climate impacts. However, commercial advisory service models are rarely explicitly climate-smart, due to limited demand from farmers and businesses, insufficient understanding of the link between advisory services and climate-smart outcomes, and the difficulty of translating impacts into mitigation-related revenues (in addition to the cost of providing these services).

In addition, there is limited ecosystem support for commercial providers to develop climate-smart advisory services. While there are knowledge and convening platforms for models 1-2 (e.g., the Developing Local Extension Capacity project, FAO’s Farmer Field Schools Platform) and models 3-4 (e.g., IDH Farmfit, Sustainable Food Lab), similar platforms don’t yet exist for commercially sustainable advisory service models. The same goes for climate-smart agriculture, where a lot of the impetus is coming from governments and donors, and is still not widely adopted in more commercially oriented models. In general, research, learning, and evidence on commercial advisory services is limited. As a result, funders and enablers have little information or evidence with which to design their strategic interventions. This results in fragmented efforts—and, in some cases, distortionary impacts as grant funding for advisory services may reduce the competitiveness of other commercial service providers.

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A call to action for funders and enablers of advisory services

Based on this research, we believe there is a vital opportunity to grow the market for commercially sustainable and climate-smart advisory service provision. For this market to be successful, donors, convening platforms, and ecosystem builders must:

  1. Support emerging, sustainable advisory service models. In order to build and scale sustainable business models—and more efficiently allocate grant-based support—funders and enablers must engage directly with commercial providers. Activities could include brokering relationships between advisory service providers and businesses to build B2B revenue streams, driving growth investment to high-potential models, and using targeted grants to support innovation and experimentation (while being careful not to distort the market).  
  2. Stimulate the availability of public goods and shared infrastructure. This investment would enhance the ability of commercial advisory service providers to build sustainable models without having to develop their own infrastructure. Activities could include sharing knowledge and tools, creating platforms for complementary service delivery, and supporting specialized (model 7) service providers to more efficiently create necessary infrastructure and allow providers to focus on their core strengths.
  3. Improve coordination, collaboration, and knowledge sharing among funders and practitioners. Aligning action among funders and ecosystem enablers will drive more coordinated and effective research, learning, funding, and support. Activities may include developing knowledge around advisory services and climate-smart agriculture, agreeing to common frameworks, aggregating evidence on sustainable service models, and building a shared learning agenda.

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What's next

Informed by this study, the Swiss Re Foundation plans to explore opportunities for engaging with partners around a shared learning agenda, benchmarking database, and/or other learning infrastructure and methodology. The Swiss Re Foundation also seeks opportunities to set up and support service provider platforms, and provide targeted support to individual providers focused on commercially sustainable and climate-smart advisory services. The Swiss Re Foundation will continue to share sector-relevant insights, such as this landscape report—and invite collaboration and reactions to these findings. 

ISF Advisors seeks to continue to support these models as a “design catalyst” by disseminating research and advising on business models and investment opportunities for replication and scaling of promising models. 

We believe a common understanding of the landscape of commercially sustainable advisory service providers is critical to our shared understanding of the potential, needs, key research areas, and funding of the advisory services market.

Read the full report to learn more.


Click above to download and view the full report

About the Author(s)

ISF Advisors
Learning Lab Strategic Partner

ISF is an advisory group committed to transforming rural economies by delivering partnerships and investment structures that promote financial inclusion for rural enterprises and smallholder farmers. Combining industry-leading research with hands-on technical expertise, ISF develops practical, profitable, and sustainable financial solutions.

SwissRe Foundation
Contributor

The Swiss Re Foundation reflects the social and humanitarian values of Swiss Re, with the vision to build societies that are able to withstand and recover from health, environmental and economic risks. Their strategic commitments aim to help realize the Sustainable Development Goals and contribute to Swiss Re’s vision to make the world more resilient.

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